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How high-income earners can end up broke

A few years ago I was given a referral. The potential client was a respected and well known solicitor and it was a privilege to be referred to him.

He was earning about £30,000 a month yet spending £29,000 of it. Aged 53, he didn’t have a penny saved and despite having an income that the average person would kill to get their hands on, he was completely broke.

Few would think it was possible to be broke on such a high salary, but we do see it happen from time to time.

When you’re successful, admired in your industry and money flows into your bank account with abundance, it’s easy to assume you’ll always be this comfortable. But you can end up inflating your lifestyle to a point where it becomes expensive and unsustainable.

The solicitor wanted the opposite of everything that we try to do at Barnaby Cecil. In some ways, it was as if he didn’t want to be helped. He wanted to live solely in the moment, but we encourage people to find a balance. It’s certainly possible to make the most of the present while still preparing for the future. That’s why we help people use their money as a means to an end. Here are just a few ways high income earners can end up broke.

Thinking of money as ‘evil’ or ‘bad’

Money is often seen as a bad thing. Some people describe it as ‘the root of all evil’ and insist it can’t buy happiness. This is often used as an excuse to spend without any consideration and an argument against building wealth. 

In reality, money can be used to help others and enact real change. While it might not buy happiness, it can help people buy freedom, security and pleasure - just a few things that can certainly contribute to how content you are.

When you let your money slip through your fingers or talk about it as if it’s a person who’s done you wrong, rather than a tool that can change your life, you miss out on so many opportunities.

Spending money without intention

We have no interest in telling people to stop drinking Starbucks or switch to supermarket-brand products, but we want people to be intentional with their money so they can get what they want from life. 

Do you want to buy a beach house in California? Do you want to retire early? Do you want your kids and grandkids to never have to worry about money? For those with good incomes, all this is possible, but you need to plan ahead.

Endlessly accumulating it with no rhyme or reason

While saving and investing can give you freedom and control over your life, there’s no point endlessly accumulating money for the sake of it. 

Aggressive saving and investing might seem like the key to wealth (and the only way to avoid going broke) but what’s the point if you postpone all happiness until a later date? 

I once had a client who was obsessed with the idea of getting to £1m but hadn’t put that much thought into why or what she was going to do with this figure.

Passing wealth down to your children, grandchildren or nephews and nieces might be your goal, but you owe it to yourself to spend money while you can too. 

Young people might joke about their parents spending their inheritance on things they deem unimportant, but it’s your money and you can’t take it with you. In the words of author and money expert Ramit Sethi: ‘A rich life isn’t about how little you can spend. A rich life is about using your money and time to create your rich life.”

Not being on the same page as your partner  

I’ve had clients who’ve not been on the same wavelength with one another, whether that’s in terms of goals or spending. One client was sensible and considerate, but his wife had no concept of money and kept burning through it. He wanted me to be the middle person. He didn’t want to tell his wife to stop spending so much. He hoped I’d be the bad guy! And I always try to see viewpoints from each side. 

You need to be on the same page as your partner or at least willing to work together to achieve common goals. One of you might want to play golf every weekend while the other is more interested in regular city breaks throughout the year. It’s okay to want different things to an extent, but you need to be willing to work together and use your money in a way that’ll benefit you both.

Not listening to your adviser

As we mentioned earlier, we have no interest in berating people for spending money on little things they enjoy. If visiting restaurants three times a week makes you happy, let’s find a way to make that work along with the rest of your goals.

If you want to hire someone who’ll tell you what you want to hear, this might not work. You need to listen to us and take what we say onboard. You also need to be realistic. As much as we’d love to wave a magic wand and make any financial uncertainty disappear, predicting the future is a challenge. 

The best we can do is prepare well in advance, keep the plan up-to-date and create something that enables your money to work for you, not the other way round.

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